The SEC announced that on October 31, 2008, the United States District Court for the Northern District of Texas entered a final judgment against Donald A. Erickson, the former audit committee chairman and a former director of Magnum Hunter Resources, Inc. for insider trading. The SEC’s complaint alleged that Erickson purchased MHR securities in advance of the January 26, 2005 announcement of a merger between MHR and Cimarex Energy Company.
According to the SEC, Erickson was briefed regularly on the status of negotiations and participated in key decisions regarding the Cimarex deal. The Complaint further alleged that in mid-January 2005—just two trading days before the public announcement of the merger, and one day after he attended a board meeting addressing the status of negotiations with Cimarex—Erickson exercised his call options and acquired 30,000 shares of MHR stock.
Finally, the Commission alleged that Erickson failed to report to the Commission his purchases of MHR call options as required and that when he ultimately did make a late disclosure, his disclosure was materially false—”indicating, incorrectly, that he had exercised the options after the merger announcement.”
The final judgment requires Erickson to disgorge $46,200, plus prejudgment interest of $11,399.67. The Court also found Erickson liable for a civil penalty of $46,200 and permanently barred Erickson from acting as an officer or director of a public company.